Bank of England (BoE) Governor Andrew Bailey. Quizzed on the path of interest rates in an interview with KentOnline, Bailey suggested that rates will fall gradually. Bailey’s comments helped to reaffirm expectations that the BoE will unwind its monetary policy at a slower pace than other major central banks like the European Central Bank and Federal Reserve. However, in speaking about the progress being made on bringing inflation under control, Bailey said he is ‘very encouraged’, remarks which appeared to cement bets for another quarter point interest rate cut by the bank in November and limit the upside potential of the pound. In addition, Bailey was asked about the economic impact of Brexit, in which he warned of a ‘short-term painful effect on trade’
US Dollar (USD) Subdued amid Upbeat Market Mood The US Dollar (USD) struggled to attract support on Tuesday as risk-on flows limited the appeal of the safe-haven currency. Market sentiment improved on Tuesday following the news that China’s central bank launched a series of stimulus measures aimed at propping up the country’s struggling economy. In addition the US Dollar continued to face resistance amid a further pricing in of an aggressive interest rate cuts from the Federal Reserve in November.
GBP/USD Exchange Rate Forecast: Robust US GDP to Lift the US Dollar Looking ahead, the absence of any notable UK or US economic data could limit movement in the Pound US Dollar exchange rate on Wednesday. However, Thursday then brings the release of the latest US GDP print. The finalised figures for the second quarter are expected to confirm that US economic growth accelerated to a healthy 3%, which may help to put a floor under the US Dollar. In the meantime, Kier Starmer’s speech at the Labour Party conference could inject some volatility into the Pound, depending on the tone struck by the Prime Minister. Could a more optimistic outlook help to buoy Sterling sentiment?
GBPUSD short-term technicals: Neutral FX analysts at Scotiabank note Pound Sterling's strength is likely to stay.
"Sterling has reversed most of the losses seen through the European session relatively easily. The broader pattern and tone of the charts remain GBP-bullish, amid steady GBP gains and strong, upward momentum on the short-, medium– and long-term oscillators. GBP dips should remain relatively shallow. Support is 1.3250. Sustained GBPUSD gains through 1.3330 long-term retracement resistance will be bullish. GBP resiliency should support further EURGBP losses towards support in the low 0.83 area, the last stopping point potentially for the cross ahead of a move back to 0.82."
